Distribution of Service Charges or Gratuities

1. Law
2. Tennessee Code
3. Employer and Employee
4. Wage Regulations
5. General Provisions
6. Distribution of Service Charges or Gratuities

1. 1. If a business, including a private club, lounge, bar or restaurant, includes on the bill presented to and paid by a customer, member or patron an automatic percentage or specific dollar amount denominated as a service charge, tip, gratuity, or otherwise, which amount is customarily assumed to be intended for the employee or employees who have served the customer, member or patron, that amount shall be paid over to or distributed among the employee or employees who have rendered that service. The payment shall be made at the close of business on the day the amount is received or at the time the employee is regularly paid, or, in the case of a bill for which credit is extended to a customer, member or patron, payment shall be made at the close of business on the day the amount is collected or on the first day the employee is regularly paid occurring after the amount is collected.
   2. The payment shall not be reduced, docked or otherwise diminished to penalize an employee for any actions in connection with the employee's employment, if it is derived from a mandatory service charge or tip collected from customers, members or patrons.
   3. 1. This section does not apply to bills for food or beverage served in a banquet, convention or meeting facility segregated from the public-at-large, except banquet, convention or meeting facilities that are on the premises of a private club.
      2. 1. This section does not apply to bills presented to or charges paid by guests for accommodations and activities at a guest ranch.
         2. For purposes of subdivision (a)(3)(B)(i), “guest ranch” means a facility segregated from the public-at-large:
            1. Offering accommodations for overnight stays and activities typical of western ranching;
            2. That may provide other recreational activities exclusively for guests in conjunction with the ranching activities, including, but not limited to, fishing, hiking, horseback riding, rafting and swimming; and
            3. At which food services are incidental to the operation of the guest ranch, are only for the guests of the guest ranch and the cost of which are included in the fee to stay.

A violation of this section is a Class C misdemeanor. Each failure to pay an employee constitutes a separate offense.

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